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We audited the Neighborhood Assistance Corporation of America (NACA), a Department of Housing and Urban Development (HUD)-approved organization providing housing counseling services to qualified home buyers or homeowners with unaffordable mortgage payments. The audit was initiated at the direction of HUD's Inspector General. Our audit objective was to determine whether NACA properly administered its HUD grants used for housing counseling activities in accordance with HUD requirements. Since HUD has the responsibility to approve and ensure compliance with counseling requirements, the audit did not evaluate NACA's initial and continued approval as a counseling agency.

To achieve our objective, we determined whether (1) NACA provided counseling services in accordance with the HUD grants and properly addressed client complaints; (2) HUD funds were properly accounted for and used to pay only counselor salaries; (3) NACA's process for documenting and reporting program results/outcomes complied with HUD grant requirements; (4) NACA staff was adequately trained and experienced in housing counseling and whether management staff adequately monitored the work of the counselors; and (5) NACA complied with HUD disclosure and conflict-of-interest requirements.

NACA generally administered its HUD grants used for housing counseling activities in accordance with HUD requirements. With respect to HUD's conflict of interest disclosure requirements, NACA adequately informed its counseling clients of its relationships with major industry partners. However, NACA needs to resolve issues raised by HUD with respect to how it discloses relationships that its local offices may have with local industry partners, such as lenders and realtors. This report discusses each area audited as indicated above to achieve our objective.

This report contains no recommendations because HUD has already asked NACA to identify every industry partner with which NACA has a financial relationship, and amend their disclosures to fully disclose these arrangements. Therefore, no further action is necessary with respect to our report.